Investing: it’s time to think long term

PUBLISHED: 09:38 17 April 2020 | UPDATED: 09:44 17 April 2020

Cruise liners look likely to do well, post-Covid-19 says Peter Sharkey. Picture: Getty Images


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Instead of reacting negatively to the coronavirus outbreak, bold investors should look at the sectors likely to do well once the virus has been tamed, says Peter Sharkey.

“Buy low, sell high” is one of those trite aphorisms which every investor is supposed to hold dear, although in truth most are delighted to buy when prices are comparatively low and, if they must, sell when share prices are relatively buoyant.

Unfortunately, many of those seeking to redeem their investments at any price and bank the cash proceeds have had to take chunky losses on the chin of late after ignoring the headline which accompanied this column more than a month ago: Buy during a panic, don’t sell.

Admittedly, a number of investors needed the cash and wanted out at any price, although the problem with this ‘strategy’ is they end up selling good and bad companies in order to raise capital.

Conversely, there’s a much larger body of investors who, instead of reacting negatively to the Coronavirus crisis, are taking the opportunity to consider possible future scenarios and which companies and sectors are likely to do well once the virus has been tamed.

Severe stock market volatility can affect even the most measured investor, especially when no-one has any idea of how long whipsaw-like conditions may last. In such circumstances, it usually pays to take a more pragmatic, circumspect view, to sit things out for a while and consider news reports similar to the one which appeared recently.

Take, for example, a recent BBC report which asked “Will we take cruise holidays again?”

The report highlighted how awful life had been on several cruise ships where passengers had been quarantined to prevent the spread of Covid-19 (it had the exact opposite effect) with their vessel just a few hundred yards from shore.

Yes, passengers must have been frustrated and frightened, especially if tempers became fraught. Once released to safety, many folks probably declared they would never set foot on a cruise liner again, but that is extremely unlikely.

Prior to the onset of the pandemic, the global cruise holiday sector had an aggregate value of £37 billion; it accommodated more than 26 million passengers every year. Could it really now be worthless? Of course not, primarily because holidaymakers have notoriously short memories.

Consider the terror attacks on cities such as Brussels, Paris, London and Nice, still fresh in the memory of most of us. In each instance, visitor numbers to these cities returned to pre-attack levels within three months.

Twelve months ago, Carnival, the world’s largest cruise operator, had a market worth of £5.7 billion; today, it’s value has slumped to £1.3 billion. But how much will it be worth this time next year after

the virus has been condemned to history and millions of people are looking to get away on holiday, almost irrespective of cost? When couched in these terms, bolder investors may believe Carnival is worthy of further consideration.

Much the same could be said of credit card companies. Once our lifestyle restrictions are lifted, it’s reasonable to assume that people will be desperate to go out, travel, buy new clothes and generally enjoy themselves. As most folks have started dipping into savings, however, it seems highly likely that whatever is left before they return to work will be supplemented by plastic credit. Investors take note.

However, not all companies will necessarily relish the return to normality.

Consider office block owners, for example. In a very short space of time, working from home (WFH) has become the nation’s norm and while short term productivity has undoubtedly been affected, it could improve markedly as people become more used to it.

Pre-lockdown, my next-door neighbour commuted for three hours every day; he’s already decided he won’t be returning to that and will WFH at least four days a week. There’s a very strong probability that millions will think along similar lines: after all, why waste 15 hours of your life sat in traffic every week?

Already, several large companies have created ‘strategy teams’ charged with investigating whether they need all of that expensive office space to accommodate thousands of employees who might be equally effective when WFH.

The impact of such a development could undermine office block owners. Most are already preparing for a downturn in demand for office space, though it could, however, be short-lived, for empty, city centre office space converts easily into residential accommodation.

Investing is often portrayed as an activity where speedy reactions and rapid decision-making are prerequisites for success. They are for trading, but investing is a longer-term activity often underpinned by correctly identifying longer-term economic trends similar to the possibilities outlined above.

TAM Asset Management Ltd offer investors the opportunity to invest their savings in Investment ISA portfolios comprising a variety of different funds pursuing long-term cautious, balanced or adventurous strategies. For further details, please visit the MoneyMapp website.

Please note: with investing, your capital is at risk.



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